The review, authored by former Kiwi Bank chief executive Sam Knowles, previously described the banking system as high-cost and relatively unprofitable, with non-performing loans as the biggest roadblock to the sector’s growth.
The country’s property legislation was also seen as problematic and a contributing factor to inflated lending rates, however the government has said “... it will always maintain the Cook Islands hereditary system of land ownership.”
The final report contained seven recommendations aimed to improving the banking environment in the Cook Islands, which were all sifted through and acknowledged by the Ministry of Finance and Economic Management (MFEM).
“The government has gone through Sam’s recommendations carefully and I think we have struck the right balance moving forward,” said Finance Minister Mark Brown.
Brown said the government has accepted a recommendation to establish a ‘Non–Performing Loan Task Force’ which will aim to “work through with the three banks to gain a deeper understanding of the problem and identify strategies that could be employed by the banks to ensure that assets underlying the stock of non-performing loans could be put back to use.”
The government will shortly announce an eminent person to head the task force, Brown said.
Currently non-performing loans amount to 16 per cent of total loans ($45 million), as compared with New Zealand’s non-performing loans, which amount to just over 1 per cent of its total loans.
The report also made specific recommendations on land management issues, which the government recognised must be dealt with delicately.
Together with the Ministry of Justice, MFEM is planning a preliminary review of the issues involved in the area of land policy.
“These are obviously complex issues whilst the government recognises there are reforms required it will not act on these straight away,” reads an MFEM release.
“Land is a sacrosanct aspect of who we are, it is crucial to our being, our history, our culture, it is who we are,” said Brown. “The government will not rush blindly into these issues.”
“We need to start a dialogue with all stakeholders, such as the traditional leaders of the country, the Leases Approval Tribunal (LAT), and the Law Society to ensure we get the balance right.”
Additionally, Minister Brown said the government will also commence work through the Ministry of Justice to introduce an insolvency bill to parliament in 2014.